For the following question, provide an explanation of the correct answer and why the other choices...

Question

Question

business accounting

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

As per the above given Information, Marsha Exchanged a land with FMV of $72,700 and also paid $5000 cash for land of FMV of $57,700 and also received an automobile worth $20,000.Hence profit or loss for the above transaction can be calculated as follows:

As per IND AS, In case of exchange of land the exchange value will be the Fair value of Asset received or Fair value of asset forgone which ever is more clear. Hence, in this case,

The fiar value of Asset received = Fair value of asset forgone

,=> Fair value of Asset received = $ 57,700 + $ 20,000 =$ 77,700

=> Fair value of Asset forgone = $72,700 +$5000 = $77,700

Hence in this case there is no profit or loss on the exchange of assets, since the fair values of assets exchanged are the same.

Hence the correct option is Option A.

Option D cannot be the answer because adjusted basis of land cannot be taken for calculation of profit or loss on exchange of the assets when fair value is known. Since the fair values are given in the above information, it is assumed at books are restated periodically at fair values.

Add a comment

Answer 2

Similar Homework Help Questions

Flash Thompson exchanged land with an FMV of $74,500 and an adjusted basis of $40,000 for...

Flash Thompson exchanged land with an FMV of $74,500 and an adjusted basis of $40,000 for land with an FMV of $59,500. Flash also paid with securities with a FMV of $5,000 and an adjusted basis of $3,100 and received an automobile worth $20,000. What is Flash’s realized gain, recognized gain and basis in the property received?
For the following question, provide an explanation of the correct answer and why the other choices...

For the following question, provide an explanation of the correct answer and why the other choices are incorrect. 3) Agnes sold 50 shares of ABC stock to her son, Steve, in Year 4 for $42,000. She bought the stock eight years ago for $50,000. Steve sold the stock to an unrelated party in Year 6 for $60,000. How much gain will Steve recognize from the sale in Year 6? A. $0 B. $10,000 C. $18,000 D. $60,000 Recognized Gain New...
provide an explanation of the correct answer and why the other choices are incorrect. 3) Gray...

provide an explanation of the correct answer and why the other choices are incorrect. 3) Gray is a 50% partner in Fabco Partnership. Gray’s tax basis in Fabco on January 1, year 4, was $5,000. Fabco made no distributions to the partners during year 4 and recorded the following: Ordinary income $20,000 Tax-exempt income 8,000 Portfolio income 4,000 What is Gray’s tax basis in Fabco on December 31, year 4? a) $21,000 b) $16,000 c) $12,000 d) $10,000

Mary transfers a building (adjusted basis of $15,000 and fair market value of $90,000) to White...

Mary transfers a building (adjusted basis of $15,000 and fair market value of $90,000) to White Corporation. In return, Mary receives 80% of White Corporation's stock (worth $65,000) and an automobile (fair market value of $5,000). In addition, there is an outstanding mortgage of $20,000 (taken out 15 years ago) on the building, which White Corporation assumes. With respect to this transaction: a. Mary has no recognized gain. b. White Corporation's basis in the building is $15,000.0 boobs c. Mary's...
Tax Accounting

Questions 1-15 are based on the following information:Five individuals, A, B, C, D, and E, formed X Co. After making the following transfers to X Co., they own 100% of X Co:A$40,000 cash and $15,000 worth of servicesBProperty:FMV $50,000BASIS $50,000MORTGAGE $30,000CProperty:FMV $80,000BASIS $20,000MORTGAGE $30,000DProperty:FMV $26,000BASIS $56,000EProperty:FMV $73,000 (capital asset)BASIS $30,000MORTGAGE $3,000 (Depreciation recapture potential of $7,000)In return, they receive the following from X Co:A$55,000 StockB$15,000 Stock + $5,000 CashC$42,000 Stock...
In each of the problems below please describe the tax consequences to the parties involved in...

In each of the problems below please describe the tax consequences to the parties involved in the transaction. The answer should include an analysis of whether Section 351 applies to the transaction (unless the problem already states that Section 351 applies) and the computations for any recognized gain, the tax basis of any stock received by the shareholders; the tax basis of any property received by the corporation and the holding period of the stock/property. 1. On January 1, 2019...

Please read the following carefully. For each question, you should assume that: 1. unless expressly stated to...

Please read the following carefully. For each question, you should assume that: 1. unless expressly stated to the contrary, all events occurred in “the current taxable year;” 2. all persons are United States citizens; 3. there is no tax avoidance purpose for any transaction, and that with respect to any mortgage on any property, there was a bona fide business purpose for incurring or assuming the debt; 4. unless expressly stated to the contrary, the partnership has no hot assets, has no debts or...
Ben and Jerry decide to incorporate their ice cream business. Allie would also like to be a shareholder in the bu...

Ben and Jerry decide to incorporate their ice cream business. Allie would also like to be a shareholder in the business. As such, Ben and Allie agree that immediately after the incorporation of the company and the issuance of stock, Ben will sell Allie half of his shares in the company. Ben contributes inventory (FMV $60,000, Basis $30,000), and accounts receivable (FMV $40,000, Basis $40,000) to the corporation for 50% of the stock, and Jerry contributes equipment (FMV $60,000, Basis...
1. Joe buys a piece of land on January 3rd of the current year. He pays$10,000...

1. Joe buys a piece of land on January 3rd of the current year. He pays$10,000 in cash. What is Joe’s basis in the land? 2. Suppose Joe gives the seller $7,000 in cash and a note for $3,000 paying interest at the current rate of 3%. What is Joe’s basis in the land? 3. Suppose instead that Joe gives the seller $6,000 in cash, a note with interest, promising to pay $3,000 in one year, and a piece of...

Lorenzo is the sole proprietor of a trampoline shop. During 2019, the following transactions occurred. Unimproved...

Lorenzo is the sole proprietor of a trampoline shop. During 2019, the following transactions occurred. Unimproved land adjacent to the store was condemned by the city on February 1. The condemnation proceeds were $15,000. The land, acquired in 1986, had an allocable basis of $40,000. Lorenzo has additional parking across the street and plans to use the condemnation proceeds to build his inventory. A truck used to deliver trampolines was sold on January 2 for $3,500. The truck was purchased...

For the following question, provide an explanation of the correct answer and why the other choices...

Homework Answers

Add Answer to:
For the following question, provide an explanation of the correct answer and why the other choices...

Post as a guest

Earn Coins

Flash Thompson exchanged land with an FMV of $74,500 and an adjusted basis of $40,000 for...